How would you like to be able to achieve an increase in premiums at a compound annual growth rate of 24 percent for the next few years? Not probable, you say? Actually, that's the figure a McKinsey study has projected for the commercial and personal auto insurance market in China, where the "transition from bicycles to cars in urban areas has ignited the country's automobile insurance market."
An enviable position to be in? Maybe. It also turns out the industry's profitability is lagging behind growth, according to McKinsey, because while Chinese insurers chase the renminbi, little effort has been expended on underwriting or managing claims–and those are what boost the bottom line.
The study indicates most carriers haven't invested in business processes to distinguish between high- and low-risk customers or profitable or unprofitable distribution channels. Part of the problem, states McKinsey, is the needed information is difficult to obtain and manage.
Sound familiar? On some level it's amazing. The Chinese have a good excuse for the condition of their market information–they're brand new to this game and hopefully will not have to learn it the hard way. Unquestionably, U.S. insurers are way more mature in processes and systems, and yet the challenge remains the same.
Claims administrators and underwriters here at home need solutions that will help them gain insight into risk, causes of loss, and resulting claims. They need to model ways to predict such eventualities for the future (for more, see "Clean as a Whistle"). Success in these pursuits will increase profitability, and much depends on the quality of the data. So, the next logical question then is, Why isn't everyone who is dedicated to growing profits equally concerned about data?
That's a toughie–it requires management occasionally to set aside chasing the short-term euphoria derived from blowing away sales goals to focus on housework, which rarely is the stuff that quickens the pulse but delivers its rewards later.
A survey of participants in an Ernst & Young actuarial roundtable revealed 88 percent of attendees believe data management issues impact the ability to produce valid financial data. Yet 56 percent of the insurance executives responded they do not have a dedicated data governance team, and 67 percent don't have a data management program.
It would seem the culture clash in this case isn't one between East and West. It's actually within the borders of individual U.S. insurance companies, which in theory should be simpler to address. The culture within carriers needs to shift toward making data governance and quality as integral as any other key corporate initiative. If not, the data might just as well be in Chinese.
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